Indian Economy Quiz: Day: 104

Answer: (a)

• Only the 3rd pair is correctly matched.
• Proportional tax (flat-rate tax): The tax as a % of income remains constant as income increases.
• Progressive tax: the tax as a % of income increases as income increases.
• Regressive tax: the tax as a % of income decreases as income increases.

Answer: (b)

• Macroeconomics, as a separate branch of economics, emerged after the British economist John Maynard Keynes published his celebrated book The General Theory of Employment, Interest and Money in 1936.

Answer: (c)

• Economists looks at two realms i.e. Macroeconomics & Microeconomics
• There is big-picture macroeconomics, which is concerned with how the overall economy works. It studies such things as employment, gross domestic product, and inflation—the stuff of news stories and government policy debates.
• Little-picture microeconomics is concerned with how supply and demand interact in individual markets for goods and services.

Answer: (d)

• Economists refer to public goods as “non-rivalrous” and “non-excludable,” and most such goods are both.
• Their non-rivalry refers to the fact that the goods don’t dwindle in supply as people consume them; a country’s defenses, for example, do not run out or diminish as its population grows.
• Non-excludability means just that; the good is available to all and cannot be withheld, even from people who do not contribute to its public funding.

Answer: (d)

• Gross investment: Addition to the stock of capital which also includes replacement for the wear and tear which the previously installed capital stock undergoes.

Hence statement 1 is correct.

• Net investment: Addition to capital stock; unlike gross investment, it does not include the replacement for the depletion of capital stock.

Hence statement 2 is correct.

• If we sum the gross value added of all the firms of the economy in a year, we get a measure of the value of aggregate amount of goods and services produced in the economy in a year is called Gross Domestic Product (GDP).

Hence statement 3 is correct.

Answer: (a)

• GNP = GDP + Net factor income from abroad (NFIA)
• NFIA = Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy
• If the NFIA is in negative the, GNP < GDP
• Hence the GNP of a country can be lower than its GDP.
• Gross National Product is mostly lower than the Gross Domestic Product.
• If the income earned by domestic firms in overseas countries exceeds the income earned by foreign firms within the country, only then, GNP is higher than the GDP.

Answer: (a)

• An externality is an economic term referring to a cost or benefit incurred or received by a third party.
• However, the third party has no control over the creation of that cost or benefit.
• Pollution emitted by a factory that muddies the surrounding environment and affects the health of nearby residents is a negative externality.
• An externality can be both positive or negative and can stem from either the production or consumption of a good or service.
• The costs and benefits can be both private—to an individual or an organization—or social, meaning it can affect society as a whole.

Answer: (b)

• The quinary sector is the part of the economy where the top-level decisions are made.
• It also comprises the top decision-makers in industry, commerce & also the education sector
• Profession under this category often referred as ‘gold collar’ professions, they represent another subdivision of the tertiary sector representing special and highly paid skills of senior business executives, government officials, research scientists.

Hence statement 1 is correct.

• People engaged in secondary activities are called blue collar workers.
• People engaged in primary activities are called red-collar workers.

Hence statement 2 is incorrect.

• The natural economic movement of a country goes from agrarian economy to an industrial economy to a service economy but India has leapfrogged from an agrarian economy to a service economy.

Hence statement 3 is correct.

Answer: (a)

• The Physical Quality of Life Index (PQLI) is an attempt to measure the quality of life or well-being of a country.
• PQLI was developed in 1979 by Morris David Morris.
• Morris combined 3 component indicators to measure performance in meeting the most basic needs of the people, namely:

1.basic literacy rate (at the age of 15 years),

2.infant mortality, and

3.life expectancy at age one

• Each indicator of the three components is placed on a scale of 0 to 100.
• Zero represents worst performance
• 100 represents best performance.
• The PQLI index is calculated by averaging the three indicators giving equal weight to each and PQLI is also scaled from 0 to 100.

Answer: (c)

• India’s merchandise exports contracted 1.15% year-on-year in August to $33 billion, while inelastic imports of petroleum and coal continued to climb, lifting imports above the $60 billion mark for the 6th successive month.
• Simply put, Trade Deficit or negative balance of trade (BOT) is the gap between exports and imports.
• When money spent on imports exceeds that spent on exports in a country, trade deficit occurs.
• It can be calculated for different goods and services and also for international transactions. The opposite of trade deficit is trade surplus
• So, TRADE DEFICIT occurs when a country’s imports exceed its exports during a given time period